Financial Highlights for the Third Quarter Ended September 30, 2015

Revenues operating income for the third quarter increased 3% to $6.6 million, compared to $6.4 million in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S Dollar), non-GAAP operating income would have reflected an increase of 10% year over year to $7.1 million. Operating income decreased 5% to $5.3 million, compared to $5.6 million in the same period last year to a record-breaking result of $47.8 million.

Non-GAAP operating income for the second quarter increased 7% to $6.5 million, compared to $6.0 million in the same period last year. Excluding the impact of erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S Dollar), non-GAAP operating income would have reflected an increase of 16% year over year to $7.0 million. Non-GAAP operating margin increased by 40 basis points to 15.2%, up from 14.8% in same period last year. Operating income for the second quarter increased 5% to $5.4 million, compared to $5.1 million in the same period last year.

Non-GAAP net income for the third quarter increased 14% to $5.7 million, or $0.13 per fully diluted share, compared to $5.0 million, or $0.11 per fully diluted share in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation of cash balances denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the US Dollar), non-GAAP net income would have reflected an increase of 23% year over year to $6.2 million, or $0.14 per fully diluted share. Net income for the third quarter amounted to $4.2 million (or $0.09 per fully diluted share), compared to $4.2 million (or $0.10 per fully diluted share) in the same period last year.

Financial Highlights for the Nine-Month Period Ended September 30, 2015

Revenues for the first nine months of 2015 increased 5% to a record of $128.2 million compared to $121.8 million in the same period last year. Revenues were negatively impacted by the devaluation of the New Israeli Shekel, Euro and Japanese Yen against the U.S Dollar by 10%, 18% and 15%, respectively. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates, revenues for the first nine months would have reflected an increase of 12% year over year to a record of $135.9 million.

Non-GAAP operating income for the first nine months of 2015 increased 5% to $19.8 million compared to $18.9 million in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (mainly resulting from the devaluation of the Euro and Japanese Yen versus the U.S Dollar), non-GAAP operating income would have reflected an increase of 13% year over year to $21.4 million. Operating income for the first nine months of 2015 decreased 1% to $16.5 million compared to $16.7 million in the same period last year.

Non-GAAP net income for the first nine months of 2015 increased 9% to $16.1 million (or $0.36 per fully diluted share) compared to $14.7 million (or $0.34 per fully diluted share) in the same period last year. On a constant currency basis, excluding the negative impact from the erosion of foreign exchange rates (including the devaluation of cash balances denominated mainly in New Israeli Shekels, Euros, and Japanese Yen against the US Dollar amounting to $0.9 million), non-GAAP net income would have reflected an increase of 26% year over year to $18.6 million (or $0.42 per fully diluted share). Net income for the first nine months of 2015 decreased 1% to $12.5 million (or $0.28 per fully diluted share), compared to $12.6 million (or $0.29 per fully diluted share) in the same period last year.

Total cash, cash equivalents and short-term investments as of September 30, 2015, amounted to $80.9 million.

Comments of Management

Guy Bernstein, Chief Executive Officer of Magic Software Enterprises, said, “We are pleased to report record-breaking quarterly revenues of $45.3 million. We are continuing to see solid demand for our software and professional services from all regions, demonstrating the relevance of our enterprise mobility, cloud integration and Big Data solutions as companies move forward with digital transformations.”

“Our focus on operational discipline while enriching our offerings and enlarging our customer base has enabled us to maintain non-GAAP operating margins of over 15% despite foreign currency devaluations and a changing revenue mix. We are maintaining our revenue guidance of $166 million to $173 million for the full-year 2015, reflecting a 7% to 11% growth rate on a constant currency basis.”

Conference Call Details

Magic’s Management will host an interactive conference today, November 11, at 10:00 am Eastern Time (7:00 am Pacific Time, 17:00 Israel Time). On the call, management will review and discuss the results, and will also be available to answer investors’ questions.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, call the international dial-in number.

NORTH AMERICA: 1.888.668.9141

UK: 0 800 917 5108

ISRAEL: 03.918.0650

INTERNATIONAL: +972.3.918.0650

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call under the investor relations section of Magic’s website.

About Magic Software Enterprises

Magic Software Enterprises Ltd. (NASDAQ and TASE: MGIC) is a global provider of mobile and cloud-enabled application and business integration platforms.

Forward Looking Statements

Some of the statements in this press release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Words such as "will," "expects," "believes" and similar expressions are used to identify these forward-looking statements (although not all forward-looking statements include such words). These forward-looking statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in our Annual Report on Form 20-F for the year ended December 31, 2013 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Magic is a registered trademark of Magic Software Enterprises Ltd. All other product and company names mentioned herein are for identification purposes only and are the property of, and might be trademarks of, their respective owners.